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Andrew Hanlan, analyst at Westpac, notes that for the Australian economy, export goods prices rose by 4.5% in Q1 2019, exceeding expectations, (market median and Westpac 3.5%).

Key Quotes

“Import goods prices dipped by 0.5% in March on a pull-back in global fuel prices, largely as we anticipated (Westpac -0.8% and market median +0.4%).”

“As a result, the terms of trade for goods strengthened by 5.0% in the opening quarter of 2019. That has the terms of trade for goods 10% above a year ago, almost 40% above the low of 3 years ago and at a seven year high.”

“Commodity price strength is likely to see the terms of trade rise further in the June quarter. However, moving through the second half of 2019 and into 2020, we expect commodity prices to moderate from current elevated levels as supply responds.”

“Importantly for Australia, higher commodity prices and a rising terms of trade is driving above trend growth in national income – with nominal GDP growth at 5.5% in 2018.”